The Illinois Historic Preservation Tax Credit score Program is
administered by the Illinois State Historic Preservation Workplace in
the Illinois Division of Pure Sources. This program supplies
a state earnings tax credit score (the “IL-HTC”) equal to 25% of
a venture’s certified rehabilitation expenditures — not
to exceed $three million per venture — to house owners of licensed
historic constructions who undertake licensed rehabilitations. The
IL-HTC will be claimed to offset earnings tax imposed on people,
firms, and trusts and estates.

Builders usually look to promote historic tax credit earned throughout
the rehabilitation of a historic construction as a supply of financing
for the venture. Nonetheless, the IL-HTC will not be freely transferable
between unrelated events.

Many state tax credit score applications that award non-transferable state
tax credit enable a developer partnership to
“disproportionately allocate” the credit to its
companions. This enables traders to buy a small possession
curiosity (e.g., 1% or .01%) within the improvement partnership, and in
return, the investor may negotiate to obtain an allocation of up
to 100% of the state tax credit.

Till not too long ago, the IL-HTC statutes have been unclear as to
whether or not the IL-HTC could possibly be disproportionately allotted to
traders in IL-HTC partnerships.

Particularly, 35 ILCS 31/10(d) supplies that:

“[IL-HTCs] granted to a
partnership, a restricted legal responsibility firm taxed as a partnership, or
different a number of house owners of property shall be handed
by means of to the companions, members, or house owners
respectively on a professional rata foundation or
pursuant to an executed settlement among the many companions, members, or
house owners documenting any alternate distribution
technique” (emphasis added).

This language means that the IL-HTC could possibly be
disproportionately allotted to the house owners of a pass-through entity
if the disproportionate allocation is agreed to within the pass-through
entity’s working settlement.

Then again, till not too long ago, 35 ILCS 5/228 supplied
that:

“If the taxpayer is a
partnership or Subchapter S company, the [IL-HTC] shall be
allowed to the companions or shareholdersin accordance
with the willpower of earnings and distributive share of
earnings beneath Sections 702 and
704 and Subchapter S of the Inner Income Code” (emphasis
added).